Swatch Group Annual Report is published in French, German and English. The text on pages 1 to 17 is originally published in French and the text on pages 138 to 216 in German. These original versions are binding. Š The Swatch Group Ltd, 2014
C2
Contents Letter to Shareholder ...................................... 2 Swatch Anniversary ........................................ 4 Expansion Projects .......................................... 6 Financial Highlights ......................................... 8 Calvin Klein Update ...................................... 10 Sales Percentages ......................................... 12 Current Trends ............................................... 14 Longines and Excellence ............................. 16 Company Tradition ....................................... 18 Global Expansion .......................................... 20 Annual Recap ............................................... 22 Financial Notes .............................................. 24
1
Dear Madam, Dear Sir, Dear Fellow Shareholders, Swatch Group is the name of the multi-faceted company that we all jointly own. The fact that it was Swatch that gave its name to our company is no coincidence. Thirty one years ago, the launch of Swatchsaved the Swiss watchmaking industry. On the occasion of its 30th birthday, which we celebrated with a number of events in 2013, Swatch finally reached adulthood. Despite this, it has not in any way lost its joyous dimension, or its spontaneity, or its creativity. It may no longer entirely be the enfant terrible it was in the 1980s, but the landscape of the watchmaking industry is inconceivable without it. And as Swatch Group, we acknow- ledge our debt to the Swatch every day. However, exactly what we owe to the Swatch is not that easy to describe. Allow me to approach the issue both from my standpoint as Chair of the Swatch Group Board of Directors, and from that of the person responsible for our most recent acquisition. What we owe to the Swatch is, above all, the salvation of the Swiss
2
watchmaking sector. Without it, without this emotional product that has been an enormous success worldwide, we would never have achieved this recovery. This solid foundation has enabled us once again to make the world aware of our country’s qualities and values. We have revived the enthusiasm for timepieces made in Switzerland. We have attracted attention through emotion. Thanks to the creativity, the irony, the beauty and very importantly, the affordable aspect of an every day product, we have repositioned Switzerland and one of its traditional industries on the international scene. We have also, we daresay, radically rejuvenated this industrial sector. This success has enabled us, gradually and with considerable commitment and hard work, to reestablish our prestigious brands, to reposition them and finally, to build a solid business success with them. Perhaps there are some shareholders among you who remember the sorry state that brands like Omega, Longines and Tissot, for example, were in at the beginning of the 1980s. In the meantime, they have become the jewels in the crown of the
Swiss watchmaking industry, which hope to inspire universal passion and respect. The Swatch is also responsible for another radical change that is just as important, albeit less visible. It is essentially on an industrial level that the watchmaking industry was saved. To produce a watch with only 51 parts, to put hundreds of different variations on the market every year, to provide artists with the chance to create a canvas on the wrist, a philosophy had to be developed so that it was able to deal with basic concepts. This change did not only make it possible to create an incredible number of jobs, thus consolidating the position as a hub of Swiss industry; it did not only save professions which today are undoubtedly different but are nonetheless secured; it did not only spark a strong drive towards new technologies. Over and above all of that, it radically transformed our vision of our products and our activities. Today, a Breguet, a Blancpain, a Glash端tte Original to name just a few examples of classic masterpieces of the art of watchmaking would be unthinkable without the most recent technologies,
such as silicon balance springs, state-of-the-art materials, alloys and ceramics, as well as the production of tiny components using special machines or robots. All of these developments are only possible and can only be financed within the framework of a highly efficient, innovative industry at the peak of modernity and within the context of an industry that pays such close attention to finding qualified employees, training them and enabling them to develop, motivating them and ultimately, retaining them on our team.
Jennifer Kirsch
Chair of the Swatch Group Board of Directors
33
To celebrate its thirty years Swatch was present at Baselworld for the first time. In an exhibition hall of its own, the two-story stand presented Planet Swatch, with every Swatch model ever made. The displays changed every day to highlight different facets of the brand, from innovation to art, fashion, sports, a focus on women and finally color. At a press conference, Swatch Group CEO Nick Hayek announced the astonishingly innovative Swatch SISTEM51, an automatic (selfwinding) mechanical movement destined, like the first Swatch watches thirty years earlier, to have a game-changing impact on the industry. 2013 began with a celebration of Chinese New Year and Legend of the White Snake, a New Gent with artfully drawn serpents and brilliant colors evoking traditional Chinese decorative arts, finely woven silks and embroidered fabrics. February brought A la Folie, the Valentine’s day special with a heart-shaped cut-away dial. Swatch Est. 1983 was launched precisely 30 years after the first Swatch watches debuted in Zurich. Kalinka Malinka took up popular Russian traditions with a delightful set of five dolls and colorful floral patterns on a set of three watches.
4
6
Key Products Launched During the year include Swatch Est. 1983 honoring the brand’s 30th anniversary, and SISTEM51, the world’s first mechanical movement to be assembled on a fully automated assembly line. The New Irony Chrono and Scuba Libre collections both proved popular. The Spring Summer and Fall Winter Collections explored a range of trendy themes, and the holiday season saw the launch of the Red Knit Special.
Retail Expansion The Swatch retail concept is a recognizable statement in the world’s best shopping locations, aiming to welcome customers in a storytelling and emotional environment. Europe recently started to see continued strong improvement of the retail distribution network resulting from store renovations aligned with the new and very successful Ice Dunes concept being used.
7
-GERMANYCapital in Millions
$6.40
-CANADA-
-GREAT BRITAIN-
Capital in Millions
Capital in Millions
$4.50
$2.08
-SPAINCapital in Millions
-UNITED STATES-
$0.45
Capital in Millions
$168.9
NOTES IN CHF MILLION Income from subsidiaries.....1636 Financial income......................11 Other income.........................416 Total income.........................2166
Personnel expense.................................................... -55 General expense....................................................... -16 Depreciation and impairment............................... -174 Exchange differences............................................... -12 Taxes............................................................................ -29 Total Expenses........................................................... -286
-RUSSIACapital in Millions
$3918.9
-JAPANCapital in Millions
$3710
-MALAYSIACapital in Millions
$43.01
18% sales increase
23%
sales increase
59% sales increase
9
1010
Platnum Label The modern, distinctive, impactful, digitally-enhanced new booth at Baselworld provided an ideal setting for the launch of the Calvin Klein Platinum label, allowing the strongly upgraded repositioning of the brand on a visual level, notably expressed through a new advertising campaign. In 2014, Calvin Klein watches implemented its sell out strategy, achieving new records in both turnover and visibility in a number of regions, thus reinforcing its leadership in the realm of Swissmade fashion watches.
Great brand awareness and strong demand for watches and jewelry resulted in an excellent result in both in image improvement and turnover, with the company once again successfully enlarging its shoping network.
Sales Percentages 31.7% Increase
2.1% Increase
6.4% 7.2%
Increase
Increase
2011
2012
2013
2014
New Sales Strategy During 2014, Calvin Klein watches implemented its sell out strategy, achieving new records in both turnover and visibility in a number of regions, thus reinforcing its leadership in the realm of Swiss-made fashion watches. During the year, Calvin Klein watches also increased the quality of its distribution and gained considerable market share.
13
Currently Trending An exclusive rendezvous with the highly demanding fashion press held by Calvin Klein watches and jewelry took place in Miami where the brand presented its innovations to around fifty journalists, and also hosted an equally exclusive preview and party with a performance by Rita Ora at Baselworld, where guests enjoyed a special set by New York City based DJ Mike Nouveau. Photographer, blogger and model Hanneli Mustaparta, a contributor to Calvin Klein’s official blog was on hand to cover the event.
The opening of China’s first Calvin Klein watches store was celebrated at an event co-hosted by Laura Burdese, President of Calvin Klein watches and Susan Chen, Country Manager of Swatch Group China.
Sales Difference Between: 2014/2013
Locations of Sales Increase
59% China
20% United States
21% France
15
Excellence Meets Expertise With its long and distinguished traditions, Longines has from the start built its worldwide reputation on timepieces notable as much for their intrinsic quality as for the style and timing of their launch. The Longines Master Collection is a perfect example of this skill. On the basis of the success of this collection since its launch in 2005 Longines has now added a number of new models in pink and yellow gold, with black dials and new sizes, that have already caused a sensation on the market. These designs are reaching world markets precisely as consumers signal clear preference for products that offer genuine value and unmistakable character.
With its slogan“Elegance is an attitude�, Longines continued to support young athletes. In this manner, during Roland Garros, the Longines Future Tennis Aces tournament enables promising young tennis players step onto the Parisian court.
16
17
Company Growth In 2014, Longines continued to achieve market growth and increased its support for the world of equestrian sports through several partnerships.
18
Longines Tradition Since 1997 the Longines DolceVita collection has been the subject of fascination with its characteristic rectangular cases and its incomparable elegance.
It represents the charm of the Italian way of life – la DolceVita. Winning the hearts of women all around the world, these models are available in steel or yellow gold, or in a delicate combination of steel and rose gold; some models are set with diamonds.
19
2014 Increase Rate of Sales
Global Boutique Explansion Longines continued to build its international presence in 2014 and opened several new boutiques located all around the world.
20
Sales Increase Percentages
28% 17% 23% 11%
United States
France
Russia
Japan
21
2014 Annual Recap Swatch Group continued growth can be attributed to its retail expansion, focused distribution and aggressive marketing initiatives as well as outstanding product placements within media. In Dallas, Tourbillon opened its eighth boutique the first in Texas. In Las Vegas, it relocated to a 353 square meter space, making it the largest in the world. Hour Passion also planted its flag in the United States with the
2222
opening of two boutiques in New York and Las Vegas. Breguet boutique Beverly Hills reopened its doors to welcome a tourbillon exhibition with an exquisite reception along the entire stretch of Via Rodeo. The brand was also proud to sponsor“Precision and Splendor: Watches at The Frick Collection�.Blancpain celebrated the 60th anniversary of the Fifty Fathoms at an event held on a pier on the Hudson River in New York. A historic timeline and a sel
Glashütte Original launched the Pavonina collection. The twenties themed event at New York’s historic Waterfall Mansion celebrated women in all their facets. Jaquet Droz hosted five exclusive events where guests were immersed into the brand’s history of hand crafted watches, with an exeriential focus on handpainted dials. The brand expanded its retail network to 29 locations and hosted VIP clients at the PGA Championship in Rochester
and the America’s Cup in San Francisco. Longines established itself as the First Official Time keeper and Watch of the Triple Crown with significant presence at the Kentucky Derby, the Preakness Stakes and the Belmont Stakes. The brand also expanded into US show jumping at the Hampton Classic Horse Show, hosting VIPs at the Sony Open in Miami, where it served as Official Timekeeper and where brand ambassador Andy Murray won the championship.
2323
Financial Statement Notes General The financial statements of The Swatch Group Ltd comply with the requirements of the Swiss Code of Obligations SCO.
Risk Management The Board of Directors, the Executive Group Management Board as well as all key members of The Swatch Group Ltd have always considered the aspect of risk monitoring in their regular entrepreneurial function and in their decisions. Their constant process relating to all aspects of the business also includes a close attention to any impacts on the financial reporting. For this purpose, appropriate tools and measures are in place which permit a pro-active and constant flow of information, building the basis for timely decisions as required in a dynamic environment.
Valuation Principles On the balance sheet, assets are recorded at net realizable values and liabilities at nominal values. Exceptions to this rule are investments in subsidiaries, which are shown at their acquisition cost less appropriate write-downs, and treasury shares reserved for the management stock option plan as well as shares bought back by the company that are shown at lower of cost or market.
(CHF million)
2014
2013
Dividends........................................ 1565..........1065 Other Income......................................71............. 62 Total..................................................1636..........1127 (CHF million) Interest Income ..................................34................7 Income and Security .........................80..............43 Total ...................................................114..............50
24
The Swatch Group Ltd P.O. Box, Seevorstadt 6, CH-2501 Biel/Bienne, Switzerland Phone: +41 32 343 68 11, Fax: +41 32 343 69 11 swatchgroup.com/contactus swatchgroup.com